Sudan and the South agree to resume oil production

South Sudan and Sudan reached an agreement to resume oil production, after a disagreement over revenue sharing.

In a critical development for its fledgling economy, South Sudan announced that an agreement had been reached with Sudan to resume pumping oil through pipelines to Port Sudan by the end of the month.

The pipeline, which had been shutdown since January 2012 after a dispute over revenue sharing between South Sudan and Sudan, is critical for the landlocked nation’s oil sector. South Sudan currently has no oil refineries and relied on Sudan’s production facilities for oil exportation.

Before the disagreement halted oil production, South Sudan had a daily output of 350,000 barrels per day and the economy was beginning to achieve at least modest growth, posting a 1.4 per cent rate in 2011.

However, Sudan’s decision to cut off access to its facilities proved devastating to South Sudan’s economy. In 2012, the country’s economic output shrank 55 per cent, according to the World Bank.

The shutdown in oil production was also detrimental to Sudan. The IMF reported that the country’s GDP shrank by 11 per cent last year. This economic downturn led to widespread protests against Sudan President Omar al-Bashir. However, he has managed to retain power.

The agreement was reached this past weekend in talks mediated by former South African president Thabo Mbeki at the African Union’s headquarters in Addis Ababa.

In addition to the agreement to resume oil production, the two governments also took steps to relieve tensions stemming from the country’s civil war, which claimed nearly 1.5 million lives.

Each government agreed to withdraw troops from their boarder area and a demilitarised zone will be established.